Many airport directors at smaller airports have expressed concern about or opposition to the large section in the House FAA reauthorization bill that would convert the agency’s Air Traffic Organization (ATO) into a separate nonprofit corporation, funded by fees charged to airlines for ATC services and governed by a board nominated by key aviation stakeholders. Some airport directors, joined by small-city mayors and rural-state legislators, have written to members of the House and Senate opposing this proposed change, implying that the status quo is better for small airports than what the House bill calls for.

These concerns are based on at least five propositions, as articulated by the Alliance for Aviation Across America (AAAA):

The change means privatization of the ATC system.

The governing board would be dominated by the big airlines.

The corporation would be profit-and-loss oriented, like a for-profit company, and might therefore close down or not approve new contract towers.

ATC user fees are equivalent to taxation, and would apply to private planes and business jets, raising their cost of flying and hence the extent of their flying.

The airspace itself would be turned over to the corporation, which would make decisions that best serve the major airlines.

If those propositions were true, I would oppose the House bill, rather than supporting it. But in fact, every one of those propositions is false, as you can easily see by reading the actual text of HR.2997, the AIRR Act, which is significantly improved from last year’s version. Title II of the bill defines in detail the American Air Navigation Services Corporation. Going directly to the five points above, a fair reading of Title II makes clear the following:

First, what is proposed is not “privatization,” which in U.S. parlance means either contracting out a government service to a for-profit company (as FAA did last decade via a contract with Lockheed Martin to modernize and operate Flight Service Stations) or selling a state-owned enterprise to private investors. Instead, the bill calls for reorganizing the existing ATO by moving it out of FAA and incorporating it as a nonprofit company, removing its funding from aviation taxes appropriated each year by Congress and authorizing it instead to charge ATC fees (as all other ATC providers do worldwide), and changing its governance to a corporate board of directors nominated by all the principal aviation stakeholders, including airports and general aviation. Regulation of the ATO would remain with FAA and DOT.

Second, of 13 board members, only one would be nominated by the major airlines’ trade group A4A—a big change from last year. Another would be nominated by the Regional Airline Association (whose members provide nearly all the airline service at smaller airports) and a third by the Cargo Airline Association. Two seats would be nominated by unions—one by the controllers’ union and the other by pilots’ unions. General and business aviation would nominate two seats, and airports would nominate one. The federal government would also nominate two board members. Thus, the “big airlines” would have just one out of 13 stakeholder board members. How could this possibly be “dominance”?

Third, as a nonprofit corporation governed by a cross-section of the aviation industry, the revamped ATO must take into account all aspects of aviation. But the House bill does not leave this to chance. Chapter 907 of the bill spells out that no user can be denied access to airspace, that access to public-use airspace not be reduced, and that the contract tower program be maintained—and all of these provisions are to be enforced by the Secretary of Transportation.

Fourth, due to concerns about user fees expressed by business and general aviation, the bill prohibits by law the imposition of any ATC user fees on any category of business aviation or general aviation. The company’s board could not change this. The only way it could be changed is if Congress were to someday change the law—which is highly unlikely as long as there are robust GA Caucuses in both the House and Senate.

Finally, the bill makes clear that only the operation of the ATC system—not ownership of the airspace—would change if the bill becomes law. The airspace would remain public, shared by civil and military aviation, as it is in the more than 60 other countries with self-funded ATC corporations.

In short, AAAA has been propagating a false and misleading description of ATC reform, presenting this as far worse than the status quo for smaller airports and their communities. That’s unfortunate, since I believe the status quo is worse for smaller airports than the likely future with a nonprofit ATC corporation along the lines in the AIRR Act.

As I wrote in the July issue of this newsletter, the FAA has imposed a moratorium on contract tower approvals since the 2013 federal budget sequester. Given the pressure on FAA to prioritize its limited budget to advance a handful of NextGen programs, there is no relief in sight for lifting this moratorium, despite a growing list of qualified applicants for contract towers.

Moreover, the best hope for more airports to get contract towers is an increase in the benefit/cost ratio, so that more airports could qualify. An innovation that increases the benefits (by improving surveillance at night and in bad weather) and reduces both operating and construction costs is Remote Towers. Yet FAA has no funding program to advance Remote Towers. By contrast, the self-funded ATC corporations in Europe have remote towers in service in Scandinavia and within a year or two of certification in a number of other countries, including Germany, Hungary, and Ireland. ATC corporations can issue revenue bonds (as airport do) to finance modernization programs, which FAA cannot do.

One more point: Under the AIRR Act, airport grants under AIP would be funded by a dedicated excise tax, protected from cutbacks like those that occurred during the 2013 budget sequestration.

ATC reform will be a major issue in Congress this fall. Aviation supporters in small cities and rural states should look more carefully at this important subject, and separate propaganda from reality.

Over the years, outside researchers, such as the National Academy of Sciences (2008) have criticized TSA’s large program of Behavior Detection Officers (BDOs) trained to spot suspicious behaviors of air travelers in airport terminals. The general thrust of the critiques was that there was no serious research demonstrating that minimally trained officers using a memorized list of 96 suspicious factors could add significant value by detecting threats to aviation. TSA’s only reported evidence was data on referrals by BDOs to law enforcement. But the Government Accountability Office and others pointed out that essentially none of those referrals were for threats to aviation security: they were mostly things like being in the country illegally or being in possession of illegal drugs.

Public criticism and pressure from some members of Congress, especially Rep. Bennie Thompson (D, MS), the Ranking Member of the House Homeland Security Committee, eventually led to some changes. Between 2013 and 2016 TSA downsized the program from 3,131 BDOs to 2,393. And in April of this year, TSA reported that all BDOs had been re-designated as Transportation Security Officers and assigned to doing their behavior-spotting at checkpoints, rather than wandering around terminals. The agency also reduced the list of memorized behaviors from 94 to 36.

But when TSA recently claimed that it had identified 178 sources that showed behavior detection works, Rep. Thompson asked GAO to evaluate those sources and “assess the extent to which TSA has valid evidence demonstrating that the specific indicators in its revised list can be used to identify passengers who pose a threat to aviation security.”

The new report, GAO-17-608R, is titled “TSA Does Not Have Valid Evidence Supporting Most of the Revised Behavioral Indicators Used in its Behavior Detection Activities.” I could stop there, but you should see what a flimsy basis TSA used to justify this ongoing program.

First, here is a breakdown of the sources TSA provided. Of the 178 documents: 137 are news or opinion pieces, not studies; 21 are reviews of studies, which themselves cannot be verified. That left only 20 that are original research, which GAO had two social scientists evaluate for (1) reliability and validity of data and methods, and (2) the applicability of the research to the behavior indicators TSA now uses, which it claims the studies support.

The 20 studies themselves did not support 28 of the 36 currently used behavioral indicators. There was one source (out of the 20 studies) for each of 7 indicators, and two sources of evidence to support 1 indicator. Thus, there was a bit of support for 8 of the 36 indicators, and based only on some of the 20 actual studies, out of the 178 sources TSA cited.

How did TSA respond to the GAO report? Via its usual defenses: behavior detection is “just one layer of security” and besides, some of the BDO referrals to law enforcement lead to arrests (but not for being threats to aviation security). For this, general taxpayers and air travelers remain on the hook for $186 million per year.

After all this, you might expect GAO to recommend that the BDO program be terminated—and if checkpoints are still short of screeners (as they were last year), at least some of the 2,393 current BDOs could be re-assigned to screening duty. But GAO this time made no recommendations, merely reminding Rep. Thompson that “TSA should continue to limit funding for the agency’s behavior detection activities until TSA can provide valid evidence that demonstrates that behavioral indicators can be used to identify passengers who may pose a threat to aviation security.” This is very disappointing.

As major airlines consolidated over the past decade or more, adverse consequences have hit many airports. Consolidation meant fewer large hubs were needed by the now-larger American, Delta, and United, so former hubs like Pittsburgh and Cincinnati shrank dramatically, while the remaining large hubs grew by 10% from 2007 through 2017. But airline service declined over that same period by 6% at medium hubs, 12% at small hubs, and 15% at non-hubs. How are airports in the latter three groups coping?

Cincinnati and Pittsburgh have moved aggressively to remake themselves. Delta’s major cuts in 2010 at Cincinnati/Northern Kentucky Airport yielded two nearly-empty terminals and high landing fees that deterred new entry. So airport management tore down those two terminals and used some of the savings to improve services in the remaining one. They also invited more air cargo operators to invest in facilities on or adjacent to airport property, and reduced landing fees to attract low-cost carriers (LCCs). The results, per a July 26thWall Street Journal article, include new airline service from Allegiant, Frontier, and Southwest, growth in non-airline revenue from 49% of the airport’s total in 2013 to 62% so far this year. And cargo operations now account for 56% of landed weight, thanks to expanded operations by DHL and Amazon.

Pittsburgh, whose U.S. Airways hub was eliminated in 2004, is following a similar recovery path. More than 25 of the airport’s 75 gates are unused, and the airport authority is debating facility downsizing options—including the possibility of closing its huge landside building or eliminating one of the two buildings comprising the midfield terminal. Meanwhile, reduced landing fees and aggressive marketing efforts have led to new airline service from major carriers and LCCs alike. Southwest now has a large presence at PIT, and more recently Allegiant, Frontier, JetBlue, and Spirit have launched service there, along with European LCCs Condor and Wow Air. PIT’s June 2017 passenger volume was nearly 833,000—the highest in a decade.

Similar reinvention efforts are under way at former major hubs in Cleveland, Memphis, and St. Louis, each depending considerably on new service from LCCs.

LCCs have also played a large role in Baltimore-Washington International Airport (BWI) surpassing Washington Reagan and Washington Dulles Airports in passenger volume this year. Southwest was the initial key to BWI’s growth, lured by low landing fees and later by improvements to the terminal. More recent entrants include Allegiant, JetBlue, and Spirit, along with overseas carriers British Airways, Norwegian, and Wow Air.

New entry by lower-cost carriers also offers new hope for secondary airports in major markets, such as Long Beach, Phoenix-Mesa Gateway, and Stewart, north of New York City. Long Beach last year was able to increase the number of daily flights permitted under its noise ordinance to 50 from the former limit of 41. Southwest took advantage, competing with LGB’s primary carrier, JetBlue. The result was that in first-half 2017, passenger volume was up by 47% compared with 2016.

Phoenix-Mesa Gateway has struggled to establish itself as an alternative to Phoenix Sky Harbor (an American hub). Gateway’s largest air carrier is Allegiant, which recently announced new routes to Indianapolis and St. Louis. But with Allegiant focused primarily on leisure travel, Gateway is seeking a business-focused carrier such as United Express that would link to one or more major hubs such as Denver and Chicago.

Several secondary airports in the Northeast are hoping that this year’s entry by long-haul LCC Norwegian Air will reposition them as better alternatives to major hubs. The airline this summer began offering service to an array of European cities from Hartford, Providence, and Stewart (in Newburgh, NY). Destinations include Belfast, Bergen, Cork, Dublin, Edinburgh, and Shannon—most are offered between two and five times per week. The average cost per passenger at the three secondary airports is significantly lower than at Boston Logan and New York JFK.

The good news for U.S. airports is that the U.S. market is still one of largely open entry—and that offers a way forward for airports (and their passengers) that have lost service due to mergers among major airlines.

Back in March, the White House budget outline for the Department of Homeland Security announced the goal of ensuring that “the cost of government [aviation security] services is not subsidized by taxpayers who do not directly benefit from those programs.” In principle, I agree with that point (though others argue that aviation security should be viewed as the same kind of public good as national defense, and paid for by all taxpayers). But the means chosen in the budget outline was an increase in the Passenger Security Fee (which is added onto each airline ticket).

Airlines rightly objected to this, on the grounds that when Congress last increased that fee in 2014 (from $2.50 per enplanement and maximum of $5 per one-way trip) to $5.60 per one-way trip, it diverted $1.3 billion per year of the revenue to federal deficit reduction. So that part of this “user tax” became a general tax, pure and simple. And that is inconsistent with the Administration’s goal. On the principle of first do no harm, the most pressing reform is to end that transfer to the general fund and dedicate that $1.3 billion toward TSA’s screening operations that are intended to benefit air travelers.

This concern has resonated with a number of House members knowledgeable about aviation and security. In May, Reps. Peter DeFazio (D, OR), Bennie Thompson (D, MS), and Bonnie Watson Coleman (D, NJ) introduced HR. 2514 that would require all proceeds from the existing Passenger Security Fee to be devoted to TSA. More recently, in mid-July the House Appropriations Committee 2018 spending measure for the Department of Homeland Security rejected the Administration’s proposed increase in the Security Fee, but failed to mandate that the $1.3 billion be redirected to TSA rather than deficit reduction.

In the United States, ever since the Reagan Administration, small airports have had the option of obtaining a lower-cost control tower via the FAA’s Federal Contract Tower program. But the airports don’t get to choose their contract operator; it is chosen for them by FAA.

The situation in Europe is different. As I’ve written previously, control towers in the U.K. have long been “contestable.” That means the airport is the decision-making entity: it can either provide tower services itself (meeting national government standards) or contract with any certified control tower provider. In recent years, that model has spread to at least four other European countries.

The most recent report on this phenomenon comes from a research consortium called Compair (which stands for competition in air traffic management), funded by the E.U.’s SESAR program. A Compair workshop in Madrid earlier this year (reported on by Aviation Advocacy’s blog) offered a current status report on control tower competition and some findings on the benefits.

As of the first of this year, Compair reported the following:

Sweden

17 towers contracted to new operators

Germany

14 towers contracted to new operators

Spain

12 towers contracted to new operators

U.K.

11 towers, with 3 to newcomers and 8 renegotiated with incumbent

Norway

1 tower about to be contracted to newcomer

The main research findings on tower competition, as summarized by Aviation Advocacy, are as follows:

Competition led to reduced tower costs of up to 50%.

Competition encourages use of new technology to improve service or reduce costs.

Privatized airports are the main drivers of tower competition.

Competition can lead to lower-cost renewal of incumbent tower services.

An effective competitive process requires that all competitors have access to all relevant information.

One other useful finding was that how tower services are paid for makes a big difference. If the country’s ATC provider charges the airport directly for tower services, then the airport has a strong incentive to seek competitive bids. But if the charges for the tower are embedded in the ATC fees charged to airlines, they will have less of an incentive to seek competition for any particular tower, especially in Europe where most airlines operate in many different countries, dealing with many ATC providers.

Members of Congress and various consumer groups have complained that the mergers which led to only four “major” airlines—American, Delta, Southwest, and United—have produced a kind of shared monopoly of airline service. If that is true, the results should be visible in higher air fares and reduced competition. But recent research findings call into question whether this is really happening.

First across my desk was a June 2017 study by economists Daniel Kasper and Darin Lee, of CompassLexecon, an economics consulting firm. Though it was commissioned by trade group Airlines for America (A4A), the study is based on data from U.S. DOT. Here are some of its principal findings:

The average number of competitors on U.S. domestic city-pairs has continued increasing, growing from 3.3 in 2000 to 3.5 in 2016.

Inflation-adjusted ticket prices are at or near historical lows, over the period 1990 through 2016.

Smaller airlines have been growing much faster than the four major airlines, as measured by available seat-miles. From 2011 through 2017, ASM growth was 3% for American/Delta/United, 21% for Southwest, 53% for JetBlue, 65% for Alaska/Virgin, and 111% for ultra-LCCs (Allegiant, Frontier, and Spirit).

Domestic origin & destination (O&D) passengers have more options to choose a carrier other than American/Delta/United; other choices were available to 65% of passengers in 2000 and to 88% of them in 2016.

The four largest airlines (including Southwest) are competing vigorously at each others’ hubs or focus cities.

I was surprised by many of these findings, but they appear to be solidly based on U.S. DOT data.

Another report crossed my desk in August. A new study from the Darden School of Business at the University of Virginia found that despite Southwest becoming a “major” carrier, the “Southwest Effect”—its lower fares leading to lower average fares in new markets it enters—is still a viable force. UVA’s Alan R. Beckenstein and aviation consultant Brian M. Campbell researched 109 daily nonstop markets that Southwest entered between 2012 and 2015 (years largely after the consolidation that produced today’s huge American, Delta, and United). They found that the weighted average fare reduction in these markets after Southwest entered was 15%, and the average traffic increase was 28%. The authors note that many of these markets had been served previously by Southwest’s one-stop service, which had already brought down average fares between those city-pairs. The fact that Southwest going to nonstop service brought further market fare reductions and increases in passenger volume is a dramatic demonstration that the Southwest effect remains potent.

Kansas City Gets Four Bids for New $1 Billion Terminal. Four companies submitted qualifications to design, build, and finance a new single terminal to replace the current multiple terminals at Kansas City International Airport. And all four submitted proposals by the August 10th due date. Assuming the selection committee selects a winner, and that the City Council approves the deal, the last hurdle will be a citywide vote on November 7th. Many locals favor retaining the existing multi-terminal design, in which they can park close to the terminal they will use.

Westchester, NY Gets Three Privatization Proposals. Three consortia in August submitted proposals for a long-term lease of Westchester County Airport under the federal Airport Privatization Pilot Program. They are led by (1) Ferrovial and Star America, (2) Macquarie Airports, and (3) Oaktree Capital Management and Connor Capital. After the county’s Airport Task Force recommends a winner, the deal will go to the county Board of Legislators, where approval requires 12 of the 17 members.

United Plans Service at Paine Field. Following up on a previous announcement by Alaska Airlines, United Airlines in mid-August announced that it, too, will serve Paine Field in the northern suburbs of Seattle, once the new privately financed terminal by Propeller Airports opens in 2018. United plans to serve Denver and San Francisco, important United hubs. A last lawsuit against commercial service at Paine Field was dismissed by the Washington Supreme Court in mid-July.

$1.8 Billion Denver Terminal P3 Approved. In mid-August, the Denver City Council voted 10-2 to approve a 34-year public-private partnership to revamp and operate the central terminal at Denver International Airport. The lead private partner for the deal is Ferrovial Airports, a major shareholder in privatized London Heathrow Airport. The project will relocate TSA security functions and greatly expand space devoted to revenue-producing shops and restaurants.

PFC Increase Making Progress in U.S. Senate. Two recent votes in the Senate would increase the federal cap on local airport passenger facility charges (PFCs) to $8.50 at the originating airport, from the current $4.50, unchanged since 2000. The increase was first included in the Senate Commerce Committee’s FAA reauthorization bill, which has not yet reached the Senate floor. Subsequently, the Senate Appropriations Committee included the PFC increase in its FY 2018 transportation and housing appropriations bill.

Airport Privatization Continues in Japan. Vinci Airports, teamed with Orix Corporation and Kansai Airports, was awarded a 42-year concession for Kobe Airport in July. The first two companies in 2016 won a 44-year concession for Kansai and Osaka International Airports; henceforth, all three of these airports will be operated and managed as a unit. In August, the Ministry of Land, Infrastructure, Transport, and Tourism announced plans to privatize seven airports in Hokkaido, in northern Japan.

Gatwick Airport Argues for a Second Runway. After years of study, last year the U.K. government decided that “the” runway addition to serve Southeastern England would be at London Heathrow, not at Gatwick. That process is moving forward, but London Gatwick has not given up. Now that it has handled a record 45 million passengers in the 12 months ending June 30th, it has renewed its call for permission to finance and build a second runway. CEO Stewart Wingate points out that Gatwick is the only one of the top 20 airports by passenger growth with a single runway. “We continue to offer the U.K. a financeable and deliverable second runway scheme which we stand ready to deliver, should the Government give us the go-ahead,” he said.

Sydney Airport Seeks More LCC Service. Unlike many major hub airports, which seem dominated by a single major airline, privatized Sydney International sees a bright future in serving long-haul low-cost carriers. It is already served by four LCCs: AirAsia X, Cebu Pacific, Jetstar, and Scoot. Aviation Daily (Aug. 21, 2017) reported that Sydney is actively seeking additional long-haul LCC service. The airport hosts 44 airlines, with service to 94 international destinations.

TSA PreCheck Tops 5 Million Members. The Transportation Security Administration announced in July that more than 5 million air travelers have enrolled in the PreCheck program since its first application center opened in December 2013. There are now over 390 such centers, though only 44 are at airport locations.

Port Authority Begins $10 Billion JFK Redevelopment. On July 25th, the Port Authority of New York and New Jersey released a request for proposals for preliminary engineering and design services on the planned $10 billion revamp of Kennedy International Airport. The program will include redeveloping or replacing older terminals, improving connections among the terminals, and upgrading the AirTrain transit system. The majority of the projects are expected to be privately financed, similar to the terminal replacement project under way at La Guardia Airport. New York State has separately committed $1.5 billion to increase capacity on the heavily congested Van Wyck Expressway serving JFK.

LAX Issues RFP for P3 People Mover Project. In the first of several major projects that comprise its Landside Access Modernization Program (LAMP), Los Angeles World Airports on August 1st released its RFP for the Automated People Mover to the three-prequalified teams seeking to design, build, finance, operate, and maintain the system. Technical proposals are due in November and financial proposals in December.

Bechtel Wins Contract for London City Airport Expansion. Investor-owned London City Airport last month selected Bechtel Corporation for its $477 million expansion project. The project includes adding a full-length taxiway alongside the single runway, adding seven new aircraft parking stands, and expanding facilities in the terminal. The expansion will allow for 6.5 million annual passengers and 111,000 flight movements per year.

New Report on Ft. Lauderdale Airport Shooting: Even Worse. The county government’s own review of the January shooting that was followed by mass panic and the complete evacuation and shut-down of the airport, reveals that response to the situation was even worse than depicted in a previous report from the County Sheriff’s Office. The 82-page consultant’s report, released in August, cites a complete lack of coordination between airport and law enforcement officials that failed to prevent or to cope with the panic spread by people using social media to spread false claims of additional shooting in all four terminals.

Atlantia Buys Stake on Bologna Airport. Italy’s largest toll road company, Atlantia, which also owns the largest share of Rome’s airports, has acquired 29% of the Bologna Airport for $194 million. Atlantia is now Bologna’s second-largest shareholder, after the Bologna Chamber of Commerce, which owns 37.5%.

“Critics assert that public-private partnerships enrich investors at taxpayers’ expense, are more expensive and less accountable, lead to public bailouts, and do little to help rural areas. But this ignores strong evidence to the contrary in states like Pennsylvania, New York, Florida, Colorado, North Dakota, and California. . . . LaGuardia Airport, often mocked for its antiquated facilities, is today completely overhauling its central terminal, thanks to a public-private partnership Almost 80 percent of the $8 billion design and construction costs will be paid for by private financing and existing passenger fees. The risk of cost overruns or construction delays is transferred from the Port Authority to a private consortium.”
—Mary E. Peters and Samara Barend, New York Times, July 17, 2017

“It’s no surprise that ACI-North America hopes to sever its reliance on the government. ‘We must act immediately to get Washington out of the way and eliminate the outdated federal restrictions that hold America’s airports back,’ wrote ACI-NA President Kevin Burke in their report. ‘By giving airports the ability to meet their local infrastructure needs without relying on federal tax dollars, airports will be well-positioned to maintain their leadership in the global aviation system.’ Quite. The global aviation system of the 1960s, he means. From no-user-fee Air Traffic Management, hopefully ‘revolutionized’ by bringing it into the 1980s, to command-and-control management of state-owned airports, the U.S. is no shining light on the hill. Unless that hill is in, say, Venezuela.”
—Andrew Charlton, “Funding Airport Infrastructure: A Global View,” Aviation Intelligence Reporter, Summer 2017

“Americans for Fair Skies, a lobbying arm of Delta Air Lines, has launched the most desperate and silly anti-Open Skies argument yet. It claims Gulf carrier competition puts U.S. national security at risk by endangering the Civil Reserve Air Fleet (CRAF) program. They argue that because Gulf carriers compete head-to-head with the Big Three in a grand total of two markets—New York-Milan and Newark-Athens—lost international share is such a threat that the Big Three will be unable to maintain their widebody fleet in support of the national military need for supplemental airlift. You cannot make this stuff up!”
—Kevin Mitchell, “Desperation in the Air: The Anti-Open Skies Crowd’s Silly CRAF Argument,” Business Travel Coalition, June 5, 2017